Guest article by A.B.S.
“In procurement lies the profit” is an old merchant’s adage that still holds true today. Negotiations are usually won by those who pursue a clear strategy and objective – this has not changed in the new year, despite the mood of crisis. In fact, no other commercial factor has as great an influence on the profit of a trading company as the conditions of goods procurement. Against this background, one of the first and most important tasks of every retailer is to optimize its procurement prices and negotiate clever strategies so that lucrative large orders remain feasible. When it comes to liquidity, however, you should always think holistically.
We will familiarize you with the most important strategies for successful liquidity management and provide 3 professional tips to help you exploit your growth potential.
Tip 1: This is how companies can close the liquidity gaps between material procurement and receipt of payment.
There is a lot of potential for liquidity in the purchase of goods – if you are clever about it.
In the past, procurement financing offers such as fine trading or reverse factoring were only available to large companies with corresponding sales volumes and were associated with complicated framework agreement models with which the main suppliers were financed. Today, procurement financing is also possible on a single invoice basis, quickly and flexibly. Elaborate application procedures and complicated contract structures are no longer necessary, so that even smaller companies, dealers or craft businesses can benefit from this type of working capital financing. This is referred to as procurement financing 2.0 or quickpaid. With quickpaid, digital procurement financing, companies can buy now and pay later.
Particularly for capital-intensive orders, financing the cost of goods is critical to success. Florens Knorr, founder and CEO of acáo GmbH, agrees.
“We produce consumer goods. There, 2 factors are decisive for liquidity management: the length of the production process itself and the payment behavior of the customers. In our industry, long payment terms of 60 to 80 days are common.”Florens Knorr, Managing Director acáo GmbH
Thus, it takes months between the purchase of goods and the receipt of money on the producer’s account. This liquidity bottleneck can be bridged on demand with quickpaid, the digital procurement financing for SMEs.
The use of quickpaid is very simple. The supplier invoice to be financed is uploaded to the quickpaid portal. You have up to 120 days to repay the invoice. The decisive advantage here:
“After 120 days, we’ve resold at least half of the merchandise and already made money.”
quickpaid therefore brings companies significant added value. Which ones are the most important in individual cases depends on your business model. However, the following advantages can be generalized:
- More liquidity: Buy goods and services as needed and as they are offered.
- Large orders can be financed immediately.
- Negotiate better purchasing conditions as an immediate payer.
- Higher profitability using cash discounts.
- Independence from own incoming payments.
- Relief of the bank line.
- Simple and fast processing, no paperwork, no collateral required.
With quickpaid, seasonal product peaks and procurement in larger lot sizes will not be a problem in the future. This includes the flexibility to take advantage of procurement opportunities and special sales as well as the immediate payment of the invoice.
Invoice through quickpaid as an ace in the negotiation of discount conditions with your suppliers. Manfred Lübbers from Uniquekoi was able to solve exactly these problems with quickpaid:
“With quickpaid, we can close this liquidity gap and fill our warehouse. We can then push the repatriation into the period when the season has already started again at our company.”Manfred Lübbers, Managing Director Unique Koi GmbH
If you want to purchase goods or services flexibly and quickly and value transparent and demand-driven costs, then quickpaid can offer you the liquidity advantage you need. Accept the large order in a relaxed manner and enjoy the success.
Tip 2: Innovative sales financing for 100% liquidity and higher returns
In economically challenging times, sales promotion instruments are very popular with manufacturing companies or wholesalers. One of these is so-called sales financing.
This means that the supplier can easily meet the customer’s wish to postpone payment for goods or services until a later date by offering quickpaid as a payment option. Buy now, pay later is the keyword here. The supplier can generate sales that are paid for later without having to use his own liquidity. This means that goods are “sold” thanks to financing – hence the name.
With sales financing, the most important thing is that the processes are fast, simple and digital. This is the case with quickpaid. Here, the customer selects the option of payment via quickpaid when completing the order process. He can then extend the payment period by 60, 90 or 120 days. The supplier receives the payment reliably and without delays directly from quickpaid. Thus, he enjoys the payment security as with payment in advance and no longer has to worry about payment terms – because the customer selects these directly with quickpaid. Time-consuming credit checks and dunning processes are also eliminated.
The quick liquidity you receive when your customers pay via quickpaid significantly reduces your outstanding accounts. Your invoice is settled immediately. As a result, you can also reduce your liabilities much faster and thus shorten your balance sheet total.
With quickpaid you have an off-balance solution as a synergy, because with quickpaid your equity ratio improves and therefore also your rating!
Use the advantages of quickpaid as an instrument to increase sales and give your customers the flexibility they need. Heidelberger Beton shows how it’s done: www.abs-global-factoring.de.
Tip 3: Leverage liquidity potential from internally generated value
As an alternative to individual sales financing via quickpaid, the supplier also has the option of using factoring as a flexible and reliable financing module for financing working capital. After all, it is precisely in these times of strained supply chains and problems in the supply chain goods on time, that the stability of working capital financing is particularly important. Therefore, especially in these times of uncertainty, every company should examine whether factoring can be a useful addition to corporate financing. Valuable assets that have already been created, such as customer receivables, can improve the liquidity situation in the long term.
You don’t know factoring yet? Factoring is an effective lever that turns your receivables into cash. This is effective because, statistically, trade receivables are the largest asset on the balance sheet of many SMEs. Up to 25% of the balance sheet total is tied up here.
“The longer the payment terms that SMEs grant their customers, the greater the leverage, because factoring is a revenue-congruent financing instrument, which means that the revenue is financed directly by the factoring company through the sale of the invoice,” explains expert Eva Sartorius.
The liquidity gained can then ideally be used to settle the company’s own liabilities. This is because suppliers who can deliver often prefer shorter payment terms and offer cash discounts, so that the costs of factoring are hardly significant. In addition, factoring enables companies to achieve their growth targets without having to apply for additional financing at length and with a high level of administrative effort. A clear advantage over bank financing.
“When companies optimize the cash conversion cycle by using alternative financing solutions, they are positioned for future stability and independence.”
Tap into your cash potential and, with the right steps, take advantage of the freedom to tackle strategic goals and visions that are crucial for your company’s growth under your own steam.
Get advice now!
Member of the Management Board of A.B.S. Global Factoring AG, Wiesbaden
Eva Sartorius has been responsible for the German market and the Group’s Finance division at A.B.S. Global Factoring AG since 2016. Before joining A.B.S. Global Factoring AG, Eva Sartorius held management positions at various financial institutions in the SME corporate client business.
The A.B.S. Group offers factoring and purchase financing solutions to medium-sized companies in the DACH region, Scandinavia, Slovenia and Poland. The Group also includes Eurincasso GmbH with its collection services for companies and dgpar Deutsche Gesellschaft für privatärztliche Abrechnung GmbH with many years of expertise in the billing of private medical services.
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